The gold price ended last week
on a lacklustre note – buffeted by
traders’ flight to equity markets amid further signs of improvement in
the US economy and a cooling of economic tensions in Europe. Gold stood at
$1,658 at Friday’s London PM Fix, down from around $1,700 last Monday.
As can be seen from the 10-year Kitco gold price
chart below, last week’s price decline in the metal took us below both gold’s 60-day moving price average (MA) and the
200-day MA. Gold hasn’t been this cheap relative to its 200-day MA
since the 2008 panic.
Both the 60 and 200-day MA are
around $1,675-$1,685 – this being something of a pivot point for the
gold market in recent weeks. Gold bulls will face selling resistance at this
point on the way up – and again at $1,700 – but their more
immediate concern will be to stem the bleeding from last week.
On this score, events as far as
the US dollar, Treasuries and commodities markets are concerned remain key (as ever). Though the Dollar Index held steady over
the course of last week, there is a more or less continuous drip of
dollar-bearish news emanating from Asia in relation to the buck’s role
as a settlement currency in international trade. And while the Fed’s
recent “no more money printing yet” comments encouraged gold
selling, it has also encouraged selling of US Treasuries – The Wall
reporting that some analysts are even daring to ask: “Is the
decades-long bull market for bonds finally over?”
Meanwhile, crude oil remains
strong. Brent crude gained $3.22 on Friday to settle at $125.82 a barrel,
while WTI gained $1.95 to settle at $107.06, with WSJ reporting market fears of a
2008-style oil price spike. Given the combination of Middle Eastern tensions
and loose monetary policy on the part of all the world’s major central
banks, it’s a question of when and not if as far as an oil price spike
is concerned. And dramatic gains in oil will make it that much harder for
short sellers to keep a lid on the gold price.